Student Loan Forgiveness Update as Mohela Forcing Repayments Sparks Fury

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Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property insurance market, local and national politics. She has previously extensively covered U.S. and European politics. Giulia joined Newsweek in 2022 from CGTN Europe and had previously worked at the European Central Bank. She is a graduate in Broadcast Journalism from Nottingham Trent University and holds a Bachelor's degree in Politics and International Relations from Università degli Studi di Cagliari, Italy. She speaks English, Italian, and a little French and Spanish. You can get in touch with Giulia by emailing: g.carbonaro@newsweek.com.

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A group of six Democratic lawmakers called on the Education Department to investigate student loan company Mohela's customer service, saying that paperwork delays caused by the business might force student loan borrowers eligible for debt relief to enter repayment.

St. Louis-based Mohela (short for Missouri Higher Education Loan Authority) is one of the biggest student loan companies in the entire country servicing both federal and private student loans by collecting and tracking payments.

Since November last year, Mohela has been the only company servicing borrowers enrolling in the Public Service Loan Forgiveness (PSLF), a federal program that encourages students to enter potentially low-paid careers in the public sector—like teaching, nursing, firefighting, or the military—by forgiving their remaining student debt after 120 monthly payments made while working for the government or a nonprofit organization.

The 120 monthly payments are the equivalent of approximately 10 years. The program only applies to those who qualify and enroll in it.

On Thursday, a group of six Democrats led by Senator Bob Menendez of New Jersey sent a letter to Education Secretary Miguel Cardona asking for the department to investigate paperwork delays at Mohela involving borrowers enrolled in the PSLF.

In the letter, the six lawmakers—Senators Menedez, Elizabeth Warren, Angus King, Alex Padilla, Ed Markey and Cory Booker—wrote that borrowers with Mohela had complained of long waiting times before getting in touch with customer service at the company, as well as problems receiving credit for the qualifying payments made toward the program.

Student loan debt
Student loan borrowers demonstrate at a rally outside of the Supreme Court, on June 30, 2023, in Washington, D.C. Six Democrats are calling on the Education Department to investigate Mohela. Paul Morigi/Getty Images for We The 45 Million

"Over the last few months, we have heard numerous concerns from public service borrowers as they prepare for the start of repayments," the lawmakers wrote.

"Many borrowers report that they have not received credit for all of the qualifying payments they have made, have experienced long wait times when attempting to contact Mohela representatives for any type of assistance, and some borrowers who have been approved for forgiveness report long wait times to actually get the refunds to which they are entitled. In some cases, we are hearing that this process can take up to a year."

They added that "with the restart of repayments, these issues are likely to worsen for borrowers."

The six Democrats called on Cardona to answer their questions about Mohela before October 1, the day student loan payments will resume for 40 million borrowers across the country.

"As the Department explores ways to ensure that borrowers are held harmless with the restart of repayments, it is vital that you not overlook these issues," they said.

"Borrowers who are eligible to have their debt canceled under the PSLF program should not be forced back into repayment due solely to Mohela's processing delays, which cause difficult financial situations for so many borrowers," they continued.

"The Administration assured public service workers across the country that the PSLF program would be fixed, yet Mohela appears to be continuing a legacy of lost paperwork, long call wait times, and processing errors and delays."

Newsweek reached out to Mohela via email for comment on Friday.

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About the writer

Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property insurance market, local and national politics. She has previously extensively covered U.S. and European politics. Giulia joined Newsweek in 2022 from CGTN Europe and had previously worked at the European Central Bank. She is a graduate in Broadcast Journalism from Nottingham Trent University and holds a Bachelor's degree in Politics and International Relations from Università degli Studi di Cagliari, Italy. She speaks English, Italian, and a little French and Spanish. You can get in touch with Giulia by emailing: g.carbonaro@newsweek.com.

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Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property ... Read more